Increased Investment in Transport Infrastructure and Rising Demand from End Users has Influenced Growth in Logistics Industry: Ken Research

Impact of GST: GST has facilitated the reduction in the transit and turnaround times of trucks by removing the multiple state taxes which were applicable earlier. In the warehousing industry, GST has led to the consolidation of the numerous warehouse companies had all over India and move towards a hub-and-spoke model of distribution. Owing to this, consolidation of the warehouse, increase warehousing size and companies have started increasing focus on Value-added-services to claim Input Tax Credit

Rising Demand of Cold Storage: India is home to the largest installed capacity of cold storage in the world, most of them being traditional cold storage capable of storing only potatoes. However, with government support for investment in cold chain infrastructure, the demand for cold storages from other end-user industries like meat and seafood, pharma, and frozen food and QSR is expected to grow in the future, as well as from fresh food which was previously not stored in cold storage.

Challenges in Logistics Industry: The logistics industry in India faces many challenges like unorganized and fragmented markets, poor infrastructure, lack of skilled labor, driver shortages, and overcapacity in the trucking industry, as well as land acquisition problems in the warehousing industry. ~25% of the national highways are congested due to low lane capacity, with the majority of national highways having two lanes or less.

Impact of COVID-19 on Trucking Industry: COVID-19 has severely impacted the trucking industry adversely. ~60% Transporters are refusing loads with driver shortage & fear of safety due to incidents of police harassment on highway checkpoints. The closure of restaurants and dhabas means the stranded truckers have nothing to eat. SFOs that live hand to mouth worst-hit ~16% SFOs have not received any load for >10 days. With thousands of vehicles stranded & drivers not expected to resume work until the situation improves, the transport sector is undergoing a paralysis. The initiatives launched to provide relief are very short-term measures that are only to provide immediate relief. The industry will need long- term plans to reach pre-lockdown operation levels. Production & demand for transport needs to pick up before the transport industry is back on its feet. The worst-case the scenario would be if the lockdown or the Corona scare is extended further for a few more months.

The report titled “India Logistics Market Outlook to FY24 – Driven by Government Infrastructure Push, New Age Logistics Startups, and Technology Innovation” provide a comprehensive analysis on the status of the logistics sector in India. The report covers various aspects including the current logistics scenario in India, its components viz, freight transportation, warehousing, CEP, VAS, and cold chain industries, the issues and challenges, major growth drivers, investment in infrastructure, tech disruptions and innovations, and competition benchmarking. The report concludes with market projections for the future of the industry including forecasted industry size by revenue.

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